November 9, 2018

For the Nine Months ended September 30, 2018, Grace Kennedy Limited (GK) recorded revenue of $73.83 billion for period (2017: $69.30 billion), a year over year increase of 7%. Revenue for the third quarter of 2018 improved11% to $25.46 billion (2017: $22.93 million). The biggest contributor to the group’s overall revenue for the nine month period came from the ‘Food Trading’ segment which contributed a total of $58.54 billion (2017: $54.34 billion), an increase of 8% relative to the prior year’s corresponding period. Management noted, “the Food Trading segment recorded growth in both revenue and pre-tax profits when compared to the corresponding period of 2017, driven primarily by the performance of our Jamaica foods business. Year to date, our Jamaica foods business has seen growth in most of our key products, and our ‘Flava with Beat’ campaign continues to garner positive reviews from the public. Brand building remains a major objective of the business as we focus on further engaging millennials while continuing to satisfy the needs of our current consumer base. Consumer Brands Limited and Procter & Gamble portfolio continue to perform well. Improved performance was largely attributable to the contribution of existing and new products that have been well received by the market.” The other segments contributing to revenue are as follows:

o    ‘Banking & Investments’ declined 4% year over year to total $4.35 billion (2017: $4.53 billion). GK indicated that, “First Global Bank’s (GFGB) results, which were impacted by a reduction in the yield on JMD loans when compared to prior year, contributed to the decline in the segment’s performance. The Bank is executing strategies aimed at growing its loans and deposits portfolio to assist in improving results. During the quarter, FGR became the first bank in Jamaica to offer agency banking with the opening of a location in Kingston.”

o    “Revenue from ‘Insurance’ amounted to $5.04 billion, a year over year increase of 15% over last year’s corresponding period of $4.38 billion. GK stated, “this was driven by the improved performance of GK Insurance (GKI) which experienced growth in its motor and property portfolios. Its engineering portfolio also recorded an increase as the Company continues to provide insurance services for many of the development projects across Kingston and St. Andrew. The increase in profitability was driven by revenue growth and improved investment returns.”

o    ‘Money Services’ brought in $5.88 billion, 3% less than the $6.04 billion reported in September 2017. Management highlighted, “this segment continues to place focus on and invest in compliance to increase our competitive advantage, which will lead to improved performance.”

Total Expenses amounted to $71.62 billion relative to $66.26 billion booked in 2017, indicating an 8% growth compared to twelve months earlier.  Expenses for the third quarter amounted to $24.68 billion, up from $21.76 billion for the same quarter of 2017.  As such, gross profit for the nine months amounted to $2.21 billion relative to $3.04 billion booked for the similar period of 2017. Gross profit for the third quarter slipped 33% to $776.29 million compared to $1.16 billion reported for the third quarter of 2017.

Other Income during the nine month period, grew 34% to total $2.27 billion (2017: $1.69 billion).

Interest income from non-financial services rose 12% to total $321.26 million compared to $287.65 million reported in the prior year’s corresponding period. Interest expenses from non-financial services amounted to $425.50 million versus $500.17 million a year earlier, a 15% reduction.

Share of results of associated companies fell by 23% amounting to $321.44 million, versus $417.70 million reported for September 2017.

Pre-tax profits decreased 5% to approximately $4.70 billion, compared to pre-tax profit of $4.94 billion documented for the nine month ended September 2017.  Additionally, GK incurred taxation expenses amounting to approximately $986.54 million compared to $1.18 billion in September 2017.

Consequently, net profit slipped 1% to $3.71 billion from $3.75 billion booked for the corresponding period of 2017. Net profit for the third quarter fell 20% to $1.26 billion (2017: $1.57 billion).

Net Profits attributable to shareholders amounted to $3.22 billion compared to $3.31 billion in the previous year’s corresponding period, showing a 3% decrease. Net profit attributable to shareholders for the third quarter amounted to $1.06 billion, down from the $1.43 billion booked for the same quarter of 2017. Management noted, “as previously reported, in 2017, the Group recorded non-recurring gains in the amount of j$455.0M in relation to the acquisition of a subsidiary and the liquidation of non-operating subsidiaries. Excluding these gains in 2017, net profit for the current period would have been higher than the corresponding period by 12.6%.”

Earnings per share for the third quarter amounted to $1.07 (2017: $1.43), while for the nine months GK booked an EPS of $3.23 (2017: $3.33). GK’s tailing EPS amounted to $4.04.  The number of shares used in our calculations is 994,886,892 units. GK’s stock price close the trading period on November 9, 2018 at $54.61.

GK indicated, “the construction of GraceKennedy Limited’s new corporate headquarters is progressing well. The team remains on track to complete the building by the end of the year and plans are in place for employees to relocate in the first quarter of 2019. The Group remains committed to the development of Downtown Kingston and is investing over J$3 billion in this project.”

Balance Sheet Highlights:

As at September 30, 2018, the company’s assets totalled $137.03 billion, 6% or $7.37 billion more than its value a year ago.  The improvement resulted in part from a growth in ‘Investment Securities’ by $3.87 billion. Investment Securities as at September 30, 2018 amounted to $33.31 billion (2017: $29.44 billion).

Shareholders’ equity amounted to $48.65 billion which compares to equity of $44.45 billion as at September 30, 2018.  As a result, book value per share amounted to $48.65 (2017: $44.68).

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